The Shotgun Marriages Forced on Breweries

Relationships should be built upon voluntary choice, promoting mutual respect and mutually beneficial outcomes. In these unions, both parties are better off with each other than they are alone. Voluntary relationships can create tremendous value to this world; however, these only exist when parties are free to associate, finding cooperation at the right time, place, and manner.

If this makes perfect sense in personal relationships, why is there a disconnect when we think about business relationships, such as between breweries and distributors? More specifically, why does North Carolina impose a distribution cap on local brewers?

Forced Affiliation

North Carolina law forces brewers to hand over 100 percent of their distribution rights to a third party once they produce 25,000 barrels.

In a voluntary market, breweries frequently find themselves in need of distribution services outside of their own capacity. Breweries may be growing too fast for their self-distribution efforts, they may be unfamiliar to a new market, or decide they can cut costs by using a third party.

Other entrepreneurs see this opportunity and offer their expertise in distribution, competing against other distributors to help solve the problems that breweries confront. Often forgotten, in a voluntary market, distributors are also competing with the breweries’ right to say “no” and keep distribution in-house.

Forcing relationships between breweries and distributors makes at least one party in the relationship worse off. But that is exactly what North Carolina has mandated upon brewers via multiple antiquated regulations. Wholesaler and big-beer company lobbyists are using the law to benefit themselves at the expense of smaller brewers and consumers. These groups have framed the debate, pitting what should be two mutually beneficial parties against each other.

Lobbyists and legislators have utilized adversarial tactics to make brewers and distributors look as if they are at war with each other. There really is no other outcome if policy continues to use the strong arm of the government to penalize and take away the rights of brewers to self-distribute their product over 25,000 barrels.

Relationships in which one party benefits only at the expense of the other party are usually called “zero-sum.” A zero-sum mentality fails to see how both parties benefit from voluntary interactions.

Absent coercion, zero-sum relationships rarely if ever exist. If one party were to suffer or be made worse off in a relationship, then it wouldn’t happen or it would quickly end. Mistakes are made and bad things do happen, though in a voluntary market there are always choices elsewhere.

It’s “Greedy” to Control Your Own Creation

In addition to self-distribution, there are many other liquor- and beer-related laws in need of reconsideration. As it stands now, breweries have few rights if they make a mistake when forced to pick a distributor. Laws supported by the wholesalers make ending a relationship with a distributor either illegal or so expensive the brewer is forced to maintain the inefficient partnership.

Trouble is, no brewer wants to make it look like distributors aren’t wanted. In a free and voluntary market, the two industries can benefit tremendously from each other.

However, wholesale union leaders are very happy to make it look like the breweries are the problem. Wholesalers fought raising the alcohol limit cap that passed in 2006. Now they allege that brewers who operate at the 25,000 barrel cap are trying to push out smaller brewers and destroy public health. All because, apparently, it is “greedy” for business owners to sell and market their own creation the way they see fit.

It seems hypocritical to insinuate that another party is controlling or greedy when in fact it’s wholesalers who use government force to push brewers around. And it’s not just in North Carolina. Check out wholesaler claims in Florida, Massachusetts, and Texas over the past few years.

As long as we allow government the power to destroy beneficial relationships, lobbying will go on. It is time for brewers to get their rights back, to choose their own methods of distribution. Then, once the government is out of the way, distributors and brewers can finally find the relationship they are looking for, at the right time for both, ensuring our beer is made and distributed by a happy marriage–not one born of cheap political tricks.

Greg Pulscher is a contributor for Opportunity Lives and works for the Civitas Institute. Hear more from Greg on his weekly podcast Free to Brew, available on Stitcher and iTunes, or follow him on Facebook.